How Stable is the Forecasting Performance of the Yield Curve for Output Growth?

• Autores: Raffaella Giacomini, Barbara Rossi
• Localización: Oxford bulletin of economics and statistics, ISSN 0305-9049, Vol. 68, Nº. 6, 2006, págs. 783-795
• Idioma: inglés
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• Resumen

  • We provide an extensive evaluation of the predictive performance of the US yield curve for US gross domestic product growth by using new tests for forecast breakdown, in addition to a variety of in‐sample and out‐of‐sample evaluation procedures. Empirical research over the past decades has uncovered a strong predictive relationship between the yield curve and output growth, whose stability has recently been questioned. We document the existence of a forecast breakdown during the Burns–Miller and Volker monetary policy regimes, whereas during the early part of the Greenspan era the yield curve emerged as a more reliable model to predict future economic activity.